Think of your top three reasons for buying up shares in a company? What are they? To be sure, the dividends must rank up there on your priority list. If you’re thinking of buying into FedEx, then you should know a couple of things about its dividends.
Dividends are measured as a percentage of the company’s profits. In fact, if you ever want to calculate the profitability of a company, looking at the share returns each stakeholder gets is a good place to start. In the past decade that FedEx has been in operation, it has not had what you would call significantly high profits. In fact, most years the company earned just about the same amount. The good news is that that means FedEx is a sure bet if you are looking for stability in your income-generating investments. The bad news- stagnating profits means that shareholders had been raking in the same amount for years. Anyone looking into FedEx dividends should not hope for drastic increases in dividends, at least not anytime soon.
Last week FedEx shares closed at $210 per share. That is just below the firm’s 52-week high of $211 apiece and way above the $145 a share that the company suffered in that period. Should the company ride on this streak, its market cap will be large. Now, FedEx’s triple digit share value might look impressive, especially considering that the current yield per share is 0.96%. The yield per share stands 25% above that of the company for the same period in 2016. These yields are based on the firm’ earnings. The thing is, while FedEx’s earnings growth potential seems great at first glance, it pales in comparison to almost 75% of the companies operating in FedEx’s industry. The average growth potential for the US and global-based logistics companies stands at about 26%; FedEx’s stands at an approximate 11%. FedEx’s earnings growth potential is an indicator that the company has a bit of a rough road ahead of it before it can become a dividend stalwart.
Even with those negatives in play, analysts are hopeful about the future of the company. Seeking Alpha rate the company’s stock as a buy because it has “very strong growth potential.” According to these analysts, the fact that FedEx growth potential stand as it is today is impressive considering its numerous stagnated dividend prices over the years, not to mention how low a dividend it is giving its shareholders at the moment. If you start from the bottom, then you have a lot of room for improvement.
Other firms, on the other hand, are more cautious about FedEx future earning potential and the consequent dividend potential. The future improvement in dividend value is based on the assumption that the company’s debt to equity ratio will remain the same over the years, and the ratio is unpredictable for the company if its history is anything to go by. Other analysts calculate that the company’s upside is way below the recommended one for stocks with the value the company’s shares have, and that could be a problem to shareholders in future. All in all, FedEx dividends are at an all-time high at the moment, and while that might be a good thing, they are too uncertain to be stellar right now.